Energy policy of the United States

Energy policy of the United States
The energy policy of the United States is determined by federal, state, and local entities. It addresses issues of energy production, distribution, consumption, and modes of use, such as building codes, mileage standards, and commuting policies. Energy policy may be addressed via legislation, regulation, court decisions, public participation, and other techniques.
Federal energy policy acts were passed in 1974, 1992, 2005, 2007, 2008, 2009,2020, 2021, and 2022, although energy-related policies have appeared in many other bills. State and local energy policies typically relate to efficiency standards and/or transportation.
Federal energy policies since the 1973 oil crisis have been criticized over an alleged crisis-mentality, promoting expensive quick fixes and single-shot solutions that ignore market and technology realities.
Americans constitute less than 5% of the world's population, but consume 26% of the world's energy to produce 26% of the world's industrial output. Technologies such as fracking and horizontal drilling allowed the United States in 2014 to become the world's top oil fossil fuel producer. In 2018, US exports of coal, natural gas, crude oil and petroleum products exceeded imports, achieving a degree of energy independence for the first time in decades. In the second half of 2019, the US was the world's top producer of oil and gas. This energy surplus ended in 2020.
Various multinational groups have attempted to establish goals and timetables for energy and other climate-related policies, such as the 1997 Kyoto Protocol, and the 2015 Paris Agreement.
History
In the early days of the Republic energy policy allowed free use of standing timber for heating and industry. Wind and water provided energy for tasks such as milling grain. In the 19th century, coal became widely used. Whales were rendered into lamp oil. Coal gas was fractionated for use as lighting and town gas. Natural gas was first used in America for lighting in 1816. It has grown in importance, especially for electricity generation, but US natural gas production peaked in 1973 and the price has risen significantly since then.
Coal provided the bulk of the US energy needs well into the 20th century. Most urban homes had a coal bin and a coal-fired furnace. Over the years these were replaced with oil furnaces that were easier and safer to operate.
From the early 1940s, the US government and oil industry entered into a mutually beneficial collaboration to control global oil resources. By 1950, oil consumption exceeded that of coal. Abundant oil in California, Texas, Oklahoma, as well as in Canada and Mexico, coupled with its low cost, ease of transportation, high energy density, and use in internal combustion engines, led to its increasing use.
Following World War II, oil heating boilers took over from coal burners along the Eastern Seaboard; diesel locomotives took over from coal-fired steam engines; oil-fired power plants dominated; petroleum-burning buses replaced electric streetcars, and citizens bought gasoline-powered cars. Interstate Highways helped make cars the major means of personal transportation. As oil imports increased, US foreign policy was drawn into Middle East politics, seeking to maintain steady supply via actions such as protcting Persian Gulf sea lanes.
Hydroelectricity was the basis of Nikola Tesla's introduction of the US electricity grid, starting at Niagara Falls, New York, in 1883. Electricity generated by major dams such as the TVA Project, Grand Coulee Dam and Hoover Dam still produce some of the lowest-priced ($0.08/kWh) electricity. Rural electrification strung power lines to many more areas.
A National Maximum Speed Limit of 55 mph (88 km/h) was imposed in 1974 (and repealed in 1995) to help reduce consumption. Corporate Average Fuel Economy (aka CAFE) standards were enacted in 1975 and progressively tightened over time to compel manufacturers to improve vehicle mileage. Year-round Daylight Saving Time was imposed in 1974 and repealed in 1975. The United States Strategic Petroleum Reserve was created in 1975.
The Weatherization Assistance Program was enacted in 1977. This program has provided services to more than 5.5 million low-income families. On average, low-cost weatherization reduces heating bills by 31% and overall energy bills by $358 per year at 2012 prices. Increased energy efficiency and weatherization spending has a high return on investment.
On August 4, 1977, President Jimmy Carter signed into law The Department of Energy Organization Act of 1977, which created the United States Department of Energy (DOE). The new agency, which began operations on October 1, 1977, consolidated the Federal Energy Administration, the Energy Research and Development Administration, the Federal Power Commission, and programs of various other agencies. Former Secretary of Defense James Schlesinger, who served under Presidents Nixon and Ford during the Vietnam War, was appointed as the first secretary.
On June 30, 1980, Congress passed the Energy Security Act, which reauthorized the Defense Production Act of 1950 and enabled it to cover domestic energy supplies. It also obligated the federal government to promote and reform the Strategic Petroleum Reserve, biofuels, geothermal power, acid rain prevention, solar power, and synthetic fuel commercialization. The Defense Production Act was further reauthorized in 2009, with modifications requiring the federal government to promote renewable energy, energy efficiency, and improved grid and grid storage installations with its defense procurements.
The federal government provided substantially larger subsidies to fossil fuels than to renewables in the 2002–2008 period. Subsidies to fossil fuels totaled approximately $72 billion over the study period, a direct cost to taxpayers. Subsidies for renewable fuels, totaled $29 billion over the same period.
In some cases, the US used energy policy to pursue other international goals. Richard Heinberg claimed that a declassified CIA document showed that the US used oil prices as leverage against the economy of the Soviet Union by working with Saudi Arabia during the Reagan administration to keep oil prices low, thus decreasing the value of the USSR's petroleum export industry.
The 2005 Energy Policy Act (EPA) addressed (1) energy efficiency; (2) renewable energy; (3) oil and gas; (4) coal; (5) tribal energy; (6) nuclear matters; (7) vehicles and motor fuels, including ethanol; (8) hydrogen; (9) electricity; (10) energy tax incentives; (11) hydropower and geothermal energy; and (12) climate change technology. The Act also started the Department of Energy's Loan Guarantee Program.
The Energy Independence and Security Act of 2007 provided funding to help improve building codes, and outlawed the sale of incandescent light bulbs, in favor of fluorescents and LEDs. It also includes funding to increase photovoltaics, and a solar air conditioning program, created the Energy Efficiency and Conservation Block Grant, and set the CAFE standard to 35 mpg by 2020.
In February 2009, the American Recovery and Reinvestment Act was passed, with an initial projection of $45 billion in funding levels going to energy. $11 billion went to the Weatherization Assistance Program, the Energy Efficiency and Conservation Block Grant, and the State Energy Program, $11 billion went to federal buildings and vehicles, $8 billion went to research and development programs, $2.4 billion went to new technology and facility development projects, $14 billion went to the electric grid, and $21 billion was projected to go to tax credits for renewable energy and electric vehicles, among others. Due in part to the design of the tax credits, the final amount of energy spending and incentives reached over $90 billion, funded 180 advanced manufacturing projects, and created more than 900,000 job-years.
In December 2009, the United States Patent and Trademark Office announced the Green Patent Pilot Program. The program was initiated to accelerate the examination of patent applications relating to certain green technologies, including the energy sector. The pilot program was initially designed to accommodate 3,000 applications related to certain green technology categories, and the program was originally set to expire on December 8, 2010. In May 2010, the USPTO announced that it would expand the pilot program.
In 2016, federal government energy-specific subsidies and support for renewables, fossil fuels, and nuclear energy amounted to $6,682 million, $489 million and $365 million, respectively.
On June 1, 2017, then-President Donald Trump announced that the U.S. would cease participation in the 2015 Paris Agreement on climate change mitigation agreed to under the President Barack Obama administration. On November 3, 2020, incoming President Joe Biden announced that the U.S. would resume its participation.
The Energy Information Administration (EIA) predicted that the reduction in energy consumption in 2020 due to the COVID-19 pandemic would take many years to recover. The US imported much of its oil for many decades but in 2020 became a net exporter.
In December 2020, Trump signed the Consolidated Appropriations Act, 2021, which contained the Energy Act of 2020, the first major revision package to U.S. energy policy in over a decade. The bill contains increased incentives for energy efficiency particularly in federal government buildings, improved funding for weatherization assistance, standards to phase out the use of hydrofluorocarbons, plans to rebuild the nation's energy research sector including fossil fuel research, and $7 billion in demonstration projects for carbon capture and storage.
Under President Joe Biden, one-third of the Strategic Petroleum Reserve was tapped to reduce energy prices during the COVID-19 pandemic. He also invoked the Defense Production Act to boost manufacturing of solar cells and other renewable energy generators, fuel cells and other electricity-dependent clean fuel equipment, building insulation, heat pumps, critical power grid infrastructure, and electric vehicle batteries.
Biden also signed the Infrastructure Investment and Jobs Act to invest $73 billion in the energy sector. $11 billion of that amount will be invested in power grid infrastructure, with the first selected recipients for $3.46 billion of the funds announced in October 2023, the largest such investment in the grid since the Recovery Act. (In November 2022 the Biden administration announced $550 million would be distributed from a grant program for clean energy generators for low-income and minority communities, created by the 2007 Energy Independence and Security Act and last funded by the Recovery Act.) $6 billion of the former amount will go to domestic nuclear power. From the $73 billion, the IIJA invests $45 billion in innovation and industrial policy for key emerging technologies in energy; $430 million–21 billion in new demonstration projects at the DOE; and nearly $24 billion in onshoring, supply chain resilience, and bolstering competitive advantages in energy, divided into an $8.6 billion investment in carbon capture and storage, $3 billion in battery material reprocessing, $3 billion in battery recycling, $1 billion in rare-earth minerals stockpiling, and $8 billion in new research hubs for green hydrogen. $4.7 billion will go to plugging orphan wells abandoned by oil and gas companies.
In August 2022, Biden signed the CHIPS and Science Act to boost DOE and National Science Foundation research activities by $174 billion and the Inflation Reduction Act to create assistance programs for utility cooperatives and a $27 billion green bank, including $6 billion to lower the cost of solar power in low-income communities and $7 billion to capitalize smaller green banks, and appropriate $270-663 billion in clean energy and energy efficiency tax credits, including at least $158 billion for investments in clean energy, and $36 billion for home energy upgrades from public utilities. The Biden administration itself claimed that , the IIJA, CaSA, and IRA together catalyzed over $511 billion in private investment (including $231 billion in electronics, $134 billion in electric vehicles and batteries, and $106 billion in clean energy generators) and over $300.1 billion in public infrastructure spending (including $22.2 billion in energy aside from tax credits in the IRA).
Department of Energy
The Energy Department's mission statement is "to ensure America's security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions."
, its elaboration of the mission statement is as follows:
"Catalyze timely, material, and efficient transformation of the nation's energy system and secure US leadership in clean energy technologies.
"Maintain a vibrant US effort in science and engineering as a cornerstone of our economic prosperity with clear leadership in strategic areas.
"Enhance nuclear security through defense, nonproliferation, and environmental efforts.
"Establish an operational and adaptable framework that combines the best wisdom of all Department stakeholders to maximize mission success."
Import policies
Petroleum
The US bans energy imports from countries such as Russia (because of the Russo-Ukrainian War), and Venezuela. The US limits exports of oil from Iran. The US imports energy from multiple countries, led by Canada, although it is a net exporter.
Export
The US does not limit energy exports, although it has in the past.
In 1975, the United States implemented a crude oil export ban, which limited most of the crude oil exports to other countries. It came two years after an OPEC oil embargo that banned oil sales to the U.S. had sent gas prices skyrocketing. Newspaper photographs of long lines of cars outside of gas stations became a common and worrisome image. Congress voted in 2015 to repeal a 40-year ban on exporting U.S. crude oil. Since that year, crude exports have skyrocketed nearly 600% to 3.2 million barrels per day in 2020, according to data from the U.S. Energy Information Administration.
Strategic petroleum reserve
The United States Strategic Petroleum Reserve stores as much as 600M barrels of oil.
Energy consumption
Sources
Energy in the United States came mostly from fossil fuels in 2021: 36% originated from petroleum, 32% from natural gas, and 11% from coal. Renewable energy supplied the rest: hydropower, biomass, wind, geothermal, and solar supplied 12%, while nuclear supplied 8%.
Utilities
Utility rates are typically set to provide a constant 10% – 13% rate of return on their investments in a process called Rate-of-return regulation. Operating cost changes are typically passed directly through to consumers.
Energy efficiency
Opportunities for increased energy are available across the economy, including buildings/appliances, transportation, and manufacturing. Some opportunities require new technology. Others require behavior change by individuals or at the community level or above.
Building-related energy efficiency innovation takes many forms, including improvements in water heaters; refrigerators and freezers; building control technologies heating, ventilation, and cooling (HVAC); adaptive windows; building codes; and lighting.
Energy-efficient technologies may allow superior performance (e.g. higher quality lighting, heating and cooling with greater controls, or improved reliability of service through greater ability of utilities to respond to time of peak demand).
More efficient vehicles save on fuel purchases, emit fewer pollutants, improve health and save on medical costs.
Heat engines are only 20% efficient at converting oil into work.
Energy budget, initiatives and incentives
Most energy policy incentives are financial. Examples of these include tax breaks, tax reductions, tax exemptions, rebates, loans and subsidies.
The Energy Policy Act of 2005, Energy Independence and Security Act of 2007, Emergency Economic Stabilization Act of 2008, and the Inflation Reduction Act all provided such incentives.
Tax incentives
The US Production Tax Credit (PTC) reduces the federal income taxes of qualified owners of renewable energy projects based on grid-connected output. The Investment Tax Credit (ITC) reduces federal income taxes for qualified tax-payers based on capital investment in renewable energy projects. The Advanced Energy Manufacturing Tax Credit (MTC) awards tax credits to selected domestic manufacturing facilities that support clean energy development.
Loan guarantees
The Department of Energy's Loan Guarantee Program guarantees financing up to 80% of a qualifying project's cost.
Renewable energy
In the United States, the share of renewable energy in electricity generation has grown to 21% (2020). Oil use is expected to decline in the US owing to the increasing efficiency of the vehicle fleet and replacement of crude oil by natural gas as a feedstock for the petrochemical sector. One forecast is that the rapid uptake of electric vehicles will reduce oil demand drastically, to the point where it is 80% lower in 2050 compared with today.
A Renewable Portfolio Standard (RPS) is a state/local mandate that requires electricity providers to supply a minimum amount of power from renewable sources, usually defined as a percentage of total energy production.
Biofuels
The federal government offers many programs to support the development and implementation of biofuel-based replacements for fossil fuels.
Landowners and operators who establish, produce, and deliver biofuel crops may qualify for partial reimbursement of startup costs as well as annual payments.
Loan guarantees help finance development, construction, and retrofitting of commercial-scale biorefineries. Grants aid building demonstration scale biorefineries and scaling up of existing biorfineries. Loan guarantees and grants support the purchase of pumps that dispense ethanol-including fuels.
Production support helps makers expand output.
Tax credits support the purchase of fueling equipment (gas pumps) for specific fuels including some biofuels.
Education grants support training the public about biodiesel.
Research, development, and demonstration grants support feedstock development and biofuel development.
Grants support research, demonstration, and deployment projects to replace buses and other petroleum-fueled vehicles with biofuel or other alternative fuel-based vehicles including necessary fueling infrastructure.
Producer subsidies
The 2005 Energy Policy Act offered incentives including billions in tax reductions for nuclear power, fossil fuel production, clean coal technologies, renewable electricity, and conservation and efficiency improvements.
Federal leases
The US leases federal land to private firms for energy production. The volume of leases has varied by presidential administration. During the first 19 months of the Joe Biden administration, 130k acres were leased, compared to 4M under the Donald Trump administration, 7M under the Obama administration, and 13M under the George W. Bush administration.
Net metering
Electricity distribution
Electric power transmission results in energy loss, through electrical resistance, heat generation, electromagnetic induction and less-than-perfect electrical insulation. Electric transmission (production to consumer) loses over 23% of the energy due to generation, transmission, and distribution. In 1995, long distance transission losses were estimated at 7.2% of the power transported. Reducing transmission distances reduces these losses. Of five units of energy going into typical large fossil fuel power plants, only about one unit reaches the consumer in a usable form.
A similar situation exists in natural gas transport, which requires compressor stations along pipelines that use energy to keep the gas moving. Gas liquefaction/cooling/regasification in the liquified natural gas supply chain uses a substantial amount of energy.
Distributed generation and distributed storage are a means of reducing total and transmission losses as well as reducing costs for electricity consumers.
Greenhouse gas emissions
While the United States has cumulatively emitted the most greenhouse gases of any country, it represents a declining fraction of ongoing emissions, long superseded by China. Since its peak in 1973, per capita US emissions have declined by 40%, resulting from improved technology, the shift in economic activity from manufacturing to services, changing consumer preferences and government policy.
State and local government have launched initiatives. Cities in 50 states endorsed the Kyoto protocol. Northeastern US states established the Regional Greenhouse Gas Initiative (RGGI), a state-level emissions cap and trade program.
On February 16, 2007, the United States, together with leaders from Canada, France, Germany, Italy, Japan, Russia, United Kingdom, Brazil, China, India, Mexico and South Africa agreed in principle on the outline of a successor to the Kyoto Protocol known as the Washington Declaration. They envisaged a global cap-and-trade system that would apply to both industrialized nations and developing countries. The system did not come to pass.
Arjun Makhijani argued that in order to limit global warming to 2 °C, the world would need to reduce CO2 emissions by 85% and the US by 95%. He developed a model by which such changes could occur. Effective delivered energy is modeled to increase from about 75 Quadrillion Btu in 2005 to about 125 Quadrillion in 2050, but due to efficiency increases, the actual energy input increases from about 99 Quadrillion Btu in 2005 to about 103 Quadrillion in 2010 and then to decrease to about 77 Quadrillion in 2050. Petroleum use is assumed to increase until 2010 and then linearly decrease to zero by 2050. The roadmap calls for nuclear power to decrease to zero, with the reduction also beginning in 2010.
Joseph Romm called for the rapid deployment of existing technologies to decrease carbon emissions. He argued that "If we are to have confidence in our ability to stabilize carbon dioxide levels below 450 p.p.m. emissions must average less than [5 billion metric tons of carbon] per year over the century. This means accelerating the deployment of the 11 wedges so they begin to take effect in 2015 and are completely operational in much less time than originally modeled by Socolow and Pacala."
In 2012, the National Renewable Energy Laboratory assessed the technical potential for renewable electricity for each of the 50 states, and concluded that each state had the technical potential for renewable electricity, mostly from solar and wind, that could exceed its current electricity consumption. The report cautions: "Note that as a technical potential, rather than economic or market potential, these estimates do not consider availability of transmission infrastructure, costs, reliability or time-of-dispatch, current or future electricity loads, or relevant policies."
In 2022, the EPA received funding for a green bank called the Greenhouse Gas Reduction Fund to drive down carbon dioxide emissions, as part of the Inflation Reduction Act, the largest decarbonization incentives package in U.S. history. The Fund will award $14 billion to a select few green banks nationwide for a broad variety of decarbonization investments, $6 billion to green banks in low-income and historically disadvantaged communities for similar investments, and $7 billion to state and local energy funds for decentralized solar power in communities with no financing alternatives. The EPA set the deadline to apply for the first two award initiatives at October 12, 2023 and the latter initiative at September 26, 2023.
See also
United States hydrogen policy
2000s energy crisis
Carbon tax
Carter Doctrine
Climate change policy of the United States
Economics of new nuclear power plants
Electricity sector of the United States
Emissions trading
Energy and American Society: Thirteen Myths
Energy in the United States
Energy law
Energy policy of the Obama administration
Energy policy of the Soviet Union
List of United States energy acts
List of U.S. states by electricity production from renewable sources
United States House Select Committee on Energy Independence and Global Warming
United States House Select Committee on the Climate Crisis
United States Secretary of Energy
World energy consumption
References
Further reading
Matto Mildenberger & Leah C. Stokes (2021). "The Energy Politics of North America". The Oxford Handbook of Energy Politics.
Oil and Natural Gas Industry Tax Issues in the FY2014 Budget Proposal Congressional Research Service
External links
US Department of Energy
Energy Information Administration
Official Energy Statistics from the US government
Residential Electricity Prices
USDA energy
United States Energy Association (USEA)
US energy stats
ISEA – Database of U.S. International Energy Agreements
Retail sales of electricity and associated revenue by end-use sectors through June 2007 (Energy Information Administration)
International Energy Agency 2007 Review of US Energy Policies
United States federal energy legislation
United States federal policy